Yellen walks tightrope in first Q&A as Fed chair

Because the economic gains needed to raise rates have been slow to emerge, the Fed has had to frequently revise its plans for a potential increase. What was once mid-2013 turned into late 2014. Then the threshold was changed toward the end of 2012 to the unemployment rate dipping below 6.5 percent.

The Fed’s decision to drop the 6.5 percent unemployment threshold “represents the difficulty in finding the perfect economic indicator for explaining something as complex as the state of the labor market recovery and other considerations such as financial stability,” James Marple, senior economist at TD Economics, wrote in a research note.

Until the time-frame issue suddenly resurfaced, Yellen had been making a case for why the Fed still needed to bolster the economy.

“She sounded a lot more dovish than hawkish,” said John Canally, an economist at LPL Financial. “She spent a lot of time talking about how far away we are from full employment.”

The Fed cut its benchmark short-term rate more than five years ago to a record low near zero, where it’s remained since.

The Fed also updated its economic forecasts Wednesday. Fed officials expect the U.S. economy to grow at a steady if modest pace in 2014 despite weather-related setbacks this winter. The Fed is forecasting growth of 2.8 percent to 3 percent this year, a bit lower than its December projection of between 2.8 percent and 3.2 percent.

The Fed’s statement was approved on an 8-1 vote. Narayana Kocherlakota, president of the Fed’s regional bank in Minneapolis, cast the dissenting vote. Kocherlakota felt the changes the Fed made to its guidance on future short-term rate increases had weakened its credibility in raising inflation to the Fed’s target of 2 percent.